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NML Capital, Ltd. v. Republic of Argentina

United States District Court, S.D. New York
May 10, 2006
05 Civ. 2434 (TPG) (S.D.N.Y. May. 10, 2006)

Opinion

05 Civ. 2434 (TPG).

May 10, 2006


OPINION


Plaintiff is the beneficial owner of certain bond indebtedness issued by defendant The Republic of Argentina. The Republic defaulted on such indebtedness in December 2001 during a profound fiscal crisis. Plaintiff is suing to recover amounts due to it as a result of the default and has moved for summary judgment.

The motion is granted.

FACTS

The bond indebtedness at issue is governed by a Fiscal Agency Agreement dated October 19, 1994 (the "1994 FAA"). The 1994 FAA is the same agreement that governed the bond indebtedness on which this court granted summary judgment to the plaintiffs in Lightwater Corporation Ltd. v. Republic of Argentina, No. 02 Civ. 3804, 2003 WL 1878420 (S.D.N.Y. Apr. 14, 2003). Section 22 of the 1994 FAA states that the Republic waives sovereign immunity and consents to jurisdiction in any state or federal court in the borough of Manhattan in the City of New York. The 1994 FAA provides that the Republic's obligations on the bonds are unconditional and that failure to make any payment of principal or interest for 30 days after the applicable payment date constitutes an event of default. A declaration by the Republic of a moratorium on the payment of principal or interest on its public external indebtedness is an event of default as well. Paragraph 12 of the 1994 FAA provides for acceleration of principal if there is a failure to pay interest or a moratorium. If either of these events occurs,

Unlike many of the debt securities at issue in other cases involving Argentine debt before this court, the notes in this case have no fixed interest rate, and are known as "Floating Rate Accrual Notes," or FRANs. For ease of reference, the court will nonetheless refer to the indebtedness on these notes as "bond indebtedness."

each holder of Securities and such Series may by such notice in writing declare the principal amount of Securities of such Series held by it to be due and payable immediately. . . .

On December 24, 2001 the Republic declared a moratorium on payments of principal and interest on the external debt of the Republic. The court refers to its previous opinions for a description of the circumstances of these defaults. Lightwater, 2003 WL 1878420, at *2; Applestein v. Republic of Argentina, No. 02 Civ. 1773, 2003 WL 1990206, at *1 (S.D.N.Y. Apr. 29, 2003). On February 25, 2005, plaintiff sent a notice to Deutsche Bank Trust Company Americas (the successor to Bankers Trust Company, the Fiscal Agent of The Republic of Argentina), declaring the principal amounts of the debt securities held by plaintiffs to be immediately due and payable.

The bond that is the subject of this action is listed hereafter. Also listed is the amount of the beneficial interests owned by plaintiff. The following table contains the necessary identifying information regarding plaintiff's beneficial interests:

The court notes the distinction between bonds and beneficial interests. In some previous opinions, the court has simply referred to the plaintiffs as owners of "bonds," when in fact plaintiffs are technically owners of "beneficial interests in bonds." The Republic actually issues "a bond" to a depository. The depository, in some form, issues "participations" to brokers, who sell "beneficial interests" to purchasers. These beneficial interests are identified by reference to the underlying bond (CUSIP or ISIN number or both; date of issuance and maturity; rate of interest) and the principal amount of the beneficial interest. This distinction is discussed more fully in Million Air Corp. v. Republic of Argentina, No. 04 Civ. 1048, 2005 U.S. Dist. LEXIS 23904 (S.D.N.Y. Oct. 17, 2005).

Plaintiff Beneficial Owner: NML Capital, Ltd.
Face Value: U.S. $ 32,000,000.00

CUSIP No., ISIN No., BB CUSIP No. 040114AX8; ISIN No. US040114AX83No.:
Date Of Issuance: March 27, 1998.

Date Of Maturity: April 10, 2005.

Interest Rate/Payable: Floating.

Date Of Purchase: On or about September 14, 2004.

Acceleration: February 25, 2005.

Contract Documents: 1994 FAA. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.)

Evidence of Ownership — Certification from JPMorgan Chase Bank datedProffered: May 27, 2005; account statement from same (Account Statements; dated September 17, 2004. Letters; Notarized Statements, etc.)

DISCUSSION

This Court has already granted summary judgment in other cases to plaintiffs seeking to collect on the Republic's defaulted FRANs issued under the 1994 FAA. See, e.g., FFI Fund, Ltd. v. Republic of Argentina, No. 05 Civ. 3328, 2006 U.S. Dist. LEXIS 6910 (S.D.N.Y. Feb. 23, 2006). Only certain specific issues need to be discussed in connection with the present motion.

Standing and Proof of Ownership

In the two opinions in Fontana v. Republic of Argentina, 415 F.3d 238 (2d Cir. 2005), and Applestein v. Province of Buenos Aires, 415 F.3d 242 (2d Cir. 2005), the Second Circuit has held that an owner of a beneficial interest, such as plaintiff here, must receive authorization from the registered holder of the bond before it may sue, but that such authorization may be granted subsequent to the filing of a lawsuit. Here, JPMorgan Chase Bank, plaintiff's broker, obtained authorization to sue from Cede Co., the holder of the bond at issue. JPMorgan in turn granted permission to sue to plaintiff.

With regard to current ownership, plaintiff has adequately demonstrated through its account statements that owned the relevant beneficial interests as of May 27, 2005. There is no evidence of any change of ownership thereafter.

CONCLUSION

Plaintiff's motion for summary judgment is granted. Judgment will be entered for the principal amount of the bonds plus accrued interest.

The parties shall consult with one another concerning the form of the judgment and the amounts of interest that should be awarded in the judgment. If the parties are unable to reach agreement on those subjects, they shall jointly submit an agreed proposed judgment to the court. If the parties are unable to reach agreement on those subjects, plaintiffs shall submit a proposed judgment to the court, and the Republic shall submit any objections to plaintiff's proposed judgment within five business days thereafter. The court will then resolve any remaining disagreements.

SO ORDERED.


Summaries of

NML Capital, Ltd. v. Republic of Argentina

United States District Court, S.D. New York
May 10, 2006
05 Civ. 2434 (TPG) (S.D.N.Y. May. 10, 2006)
Case details for

NML Capital, Ltd. v. Republic of Argentina

Case Details

Full title:NML CAPITAL, LTD. Plaintiff, v. THE REPUBLIC OF ARGENTINA, Defendant

Court:United States District Court, S.D. New York

Date published: May 10, 2006

Citations

05 Civ. 2434 (TPG) (S.D.N.Y. May. 10, 2006)